National highway projects continue to ride in first gear

Centre has awarded only 3,481 km of projects in FY24 which is nearly 60% lower than last year and 35% of its target

With two months remaining this financial year, the Ministry of Road Transport and Highways (MORTH) in January awarded contracts for only 370 km of National Highways (NH), drifting further away from its revised target of awarding 10,000 km of contracts in 2023-24, the official data shows. Through its executing agencies such as the National Highways Authority of India (NHAI), the Centre has awarded projects of 3,481 km in FY24. That is nearly 60 per cent lower than last year’s.

The ministry had the target of awarding 16,000 km in FY24, but the delays in revised cost estimates of the Bharatmala Pariyojana slowed the pace.

The ministry had raised the matter before the Union Cabinet in November, warning that the lack of awards this financial year would affect construction in the future. In a post-interim Budget interaction, Union Highways Secretary Anurag Jain had told this paper the ministry was looking at awarding 10,000 km of roads.

With the Lok Sabha elections coming close, the Centre is required to award nearly 6,500 km of highway contracts in the next two months — an order experts think is too tall.

“It is unlikely one will see a major shift in momentum for awarding highway projects in the remaining two months, especially in March, as the enforcement of model code of conduct will constrain the ministry. The year may end with 6,000-6,500 km of awards,” Rajeshwar Burla, senior vicepresident and group head, corporate ratings, ICRA, told Business Standard.

According to experts, the low number of awards would not have any major impact on capex outflow for the sector in FY25 because the lag between project awarding and the start date ranges between nine and 12 months and there is a good pipeline of projects under execution.

The effects of awards drying up may be more elaborate in FY26.

On the other hand, after a sluggish start to the year, highway construction is picking up pace, with 1,442 km being developed in the previous month. Compared to last January, construction is 40 per cent higher.

In FY24, the Centre developed 7,658 km of highways, which is approximately 13 percent higher than the 6,803 km constructed in FY23. “The construction momentum is likely to continue and the ministry may end the year higher with 11,000-11,500 km of execution,” according to Burla. The Centre has been looking to build 14,400 km of highways a year (40 km/day), but has fallen short every year.

Meanwhile, the ministry continued to be one of the better performers in capital expenditure absorption throughout the last month. “Total gross budgetary support capital expenditure outlay of MORTH for the financial year 2023-24 is ~2,64,525 crore (about ~2.65 trillion) and actual expenditure up to January 2024 is ~2,28,458 crore (about ~2.29 trillion), which accounts for 86.37 per cent of capital outlay,” the ministry said.